Stock Performance Q FINANCIAL UPDATE QUARTERLY REPORT OF THE U.S. SHAREHOLDER-OWNED ELECTRIC UTILITY INDUSTRY

Transcription

1 Stock Performance Q FINANCIAL UPDATE QUARTERLY REPORT OF THE U.S. SHAREHOLDER-OWNED ELECTRIC UTILITY INDUSTRY

2 About EEI The Edison Electric Institute is the association of U.S. shareholderowned electric companies. Our members serve 95% of the ultimate customers in the shareholder-owned segment of the industry, and represent approximately 70% of the U.S. electric power industry. We also have as Affiliate members more than 65 International electric companies, and as Associate members more than 170 industry suppliers and related organizations. About EEI s Quarterly Financial Updates EEI s quarterly financial updates present industry trend analyses and financial data covering 70 U.S. shareholder-owned electric utility companies. These 70 companies include 65 electric utility holding companies whose stocks are traded on major U.S. stock exchanges and 5 electric utilities who are subsidiaries of non-utility or foreign companies. Q financial updates will be published for the following topics. Additional topics are in development. Dividends Stock Performance Credit Ratings Construction Rate Case Summary Income Statement Balance Sheet Cash Flow Statement Business Segmentation For EEI Member Companies The EEI Finance and Accounting Division is developing current year and historical data sets that cover a wide range of industry financial and operating metrics. We look forward to serving as a resource for member companies who wish to produce customized industry financial data and trend analyses for use in: Investor relations studies and presentations Internal company presentations Performance benchmarking Peer group analyses Annual and quarterly reports to shareholders We Welcome Your Feedback EEI is interested in ensuring that our financial publications and industry data sets best address the needs of member companies and the financial community. We welcome your comments, suggestions and inquiries. Contact: Mark Agnew Manager, Financial Analysis (202) , magnew@eei.org Future EEI Finance Meetings 42nd EEI Financial Conference November 4-7, 2007 Walt Disney World Dolphin Lake Buena Vista, Florida EEI International Financial Conference March 9-12, 2008 London Hilton on Park Lane London, United Kingdom EEI Annual Finance Committee Meeting May 21, 2008 Waldorf-Astoria New York, New York 43rd EEI Financial Conference November 2-5, 2008 Marriott Desert Ridge Phoenix, Arizona For more information about EEI Finance Meetings, please contact Debra Henry, (202) , dhenry@eei.org Edison Electric Institute 701 Pennsylvania Avenue, N.W. Washington, D.C

3 The 70 U.S. Shareholder-Owned Electric Utilities Allegheny Energy, Inc. (AYE) ALLETE, Inc. (ALE) Alliant Energy Corporation (LNT) Ameren Corporation (AEE) American Electric Power Company, Inc. (AEP) Aquila, Inc. (ILA) Avista Corporation (AVA) Black Hills Corporation (BKH) CenterPoint Energy, Inc. (CNP) Central Vermont Public Service Corporation (CV) CH Energy Group, Inc. (CHG) Cleco Corporation (CNL) CMS Energy Corporation (CMS) Consolidated Edison, Inc. (ED) Constellation Energy Group, Inc. (CEG) Dominion Resources, Inc. (D) DPL, Inc. (DPL) DTE Energy Company (DTE) Duke Energy Corporation (DUK) Duquesne Light Holdings, Inc. (DQE) Edison International (EIX) El Paso Electric Company (EE) Empire District Electric Company (EDE) Energy East Corporation (EAS) Entergy Corporation (ETR) Exelon Corporation (EXC) FirstEnergy Corp. (FE) FPL Group, Inc. (FPL) Great Plains Energy Incorporated (GXP) Green Mountain Power Corporation (GMP) Hawaiian Electric Industries, Inc. (HE) IDACORP, Inc. (IDA) Ipalco Enterprises, Inc. Integrys Energy Group, Inc. (TEG) Kentucky Utilities ** KeySpan Corporation (KSE) Louisville Gas and Electric ** Maine & Maritimes Corporation (MAM) MDU Resources Group, Inc. (MDU) MGE Energy, Inc. (MGEE) MidAmerican Energy Company Niagra Mohawk Power Corporation NiSource Inc. (NI) Northeast Utilities (NU) NorthWestern Corporation (NWEC) NSTAR (NST) OGE Energy Corp. (OGE) Otter Tail Corporation (OTTR) Pepco Holdings, Inc. (POM) PG&E Corporation (PCG) Pinnacle West Capital Corporation (PNW) PNM Resources, Inc. (PNM) Portland General Electric Company (POR)* PPL Corporation (PPL) Progress Energy (PGN) Public Service Enterprise Group Inc. (PEG) Puget Energy, Inc. (PSD) SCANA Corporation (SCG) Sempra Energy (SRE) Sierra Pacific Resources (SRP) Southern Company (SO) TECO Energy, Inc. (TE) TXU Corp. (TXU) UIL Holdings Corporation (UIL) UniSource Energy Corporation (UNS) Unitil Corporation (UTL) Vectren Corporation (VVC) Westar Energy, Inc. (WR) Wisconsin Energy Corporation (WEC) Xcel Energy, Inc. (XEL) Note: Includes the 65 shareholder-owned electric utility holding companies plus an additional 5 electric utilities (shown in italics) that are not listed on U.S. stock exchanges for one of the following reasons i. they are a subsidiary of an independent power producer, ii. they are a subsidiary of a foreign-owned company, or iii. they were acquired by an investment firm. Stock symbols are shown in parentheses. *Portland General transitioned from private ownership to become a publicly traded company on April 3, The EEI Index includes Portland General beginning on January 1, **Kentucky Utilities and Louisville Gas and Electric, both subsidiaries of E.ON AG, were added to the EEI coverage universe effective January 1, EEI s historical industry financial data now includes their results.

4 Companies Listed by Category (as of 12/31/06) iven the diversity of utility holding company corporate G strategies, no single company categorization approach will be useful for all EEI members and utility industry analysts. Never-theless, we believe the following classification provides an informative framework for tracking financial trends and the capital markets response to business strategies as companies depart from the traditional regulated utility model. Regulated Mostly Regulated Diversified 80%+ of total assets are regulated 50% to 80% of total assets are regulated Less than 50% of total assets are regulated Categorization of the 65 publicly traded utility holding companies is based on year-end business segmentation data presented in 10Ks, supplemented by discussions with company IR departments. Categorization of the 5 non-publicly traded companies (shown in italics) is based on estimates derived from FERC Form 1 data and information provided by parent company IR departments. The EEI Finance and Accounting Division continues to evaluate our approach to company categorization and business segmentation. In addition, we can produce customized categorization and peer group analyses in response to member company requests. We welcome comments, suggestions and feedback from EEI member companies and the financial community. Regulated (42 of 70) Alliant Energy Corporation Ameren Corporation American Electric Power Company, Inc. Aquila, Inc. Central Vermont Public Service Corporation CH Energy Group, Inc. Cleco Corporation CMS Energy Corporation Consolidated Edison, Inc. DPL, Inc. Duquesne Light Holdings, Inc. El Paso Electric Company Empire District Electric Company Energy East Corporation Entergy Corporation Great Plains Energy Incorporated Green Mountain Power Corporation IDACORP, Inc. IPALCO Enterprises, Inc. Kentucky Utilities KeySpan Corporation Louisville Gas and Electric Maine & Maritimes Corporation MGE Energy, Inc. Niagara Mohawk Power Corporation Northeast Utilities NorthWestern Corporation NSTAR PG&E Corporation Pinnacle West Capital Corporation Portland General Electric Company Progress Energy Puget Energy, Inc. Sierra Pacific Resources Southern Company UIL Holdings Corporation UniSource Energy Corporation Unitil Corporation Vectren Corporation Westar Energy, Inc. Wisconsin Energy Corporation Xcel Energy, Inc. Mostly Regulated (19 of 70) ALLETE, Inc. Avista Corporation CenterPoint Energy, Inc. DTE Energy Company Edison International Exelon Corporation First Energy Corp. FPL Group, Inc. MidAmerican Energy Holdings NiSource Inc. OGE Energy Corp. Otter Tail Corporation Pepco Holdings, Inc. PNM Resources, Inc. PPL Corporation Public Service Enterprise Group, Inc. SCANA Corporation TECO Energy, Inc. WPS Resources Corporation * Diversified (9 of 70) Allegheny Energy, Inc. Black Hills Corporation Constellation Energy Group, Inc. Dominion Resources, Inc. Duke Energy Corporation Hawaiian Electric Industries, Inc. MDU Resources Group, Inc. Sempra Energy TXU Corp. Note: Based on assets at 12/31/06 * Changed name to Integrys Energy Group, Inc. effective February 21, 2007

5 Q Stock Performance Announcements 1. The charts and tables shown in this publication are available in Excel file format at the EEI website ( on the Quarterly Financial Updates page in the Finance section of the website (except where prohibited by copyright law). 2. Are you interested in doing customized industry peer group and financial ratio analysis? We can supply annual and quarterly SEC and FERC financial data for all 70 shareholder-owned electric utilities in easy-to-manipulate Excel format to clients of SNL Financial. Contact Mark Agnew, (202) HIGHLIGHTS nweighed down by rising interest rates, the EEI Index returned a negative 1.5% in Q2 2007, underperforming the S&P 500 (+6.3%), the Dow Industrials (9.1%) and the Nasdaq Composite (+7.5%). neei s Regulated group trailed the Mostly Regulated and Diversified groups in both Q2 and over the first half of Regulated utilities are viewed as bond substitutes by income-oriented investors and lack the competitive generators earnings exposure to tightening power markets. nfactors that continue to support utility shares as a group include steady income gains, tightening power markets, robust rate base growth and rising dividends. ndespite the underperformance evident in Q2, utility share valuations, whether measured by PE ratios or by dividend and earnings yields relative to Treasury bonds, remain well above historical norms. I. Index Comparison (% Return) FY FY FY FY FY 6 mo. Index EEI Index Dow Jones Industrials S&P Nasdaq Composite * * Price gain/loss only. Other indices show total return. / FY = Full-year Source: EEI Finance Department II. Category Comparison (% Return) FY FY FY FY FY 6 mo. Category All Companies Regulated Mostly Regulated Diversified * Returns shown here are unweighted averages of consitutent company returns. The EEI Index return shown in Table I above is cap-weighted. Source: EEI Finance Department, SNL Financial and company annual reports. COMMENTARY Interest Rate Rise Triggers Pull-back An upward spike in interest rates in May stalled a broad stock market rally and caused a sharp pullback in utility shares during Q From early May through early June, the 10- year Treasury yield rose about 60 basis points, from just over 4.6% to about 5.25% (see Chart V). The EEI Index returned a negative 1.46% for the second quarter, considerably lagging the 6% to 9% positive returns posted by the major market indices. As shown in Table X, the utility sector produced the lowest return of all major market sectors during the quarter. EEI s Regulated and Mostly Regulated company categories produced a negative return in Q2, while the Diversified category produced a 0.5% positive return (see Table VIII). The III. Total Return Comparison Value of $100 invested at 12/31/02 close, dividends reinvested EEI Index S&P 500 Index DJIA 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 6/30/07 Source: EEI Finance Department

6 2 STOCK PERFORMANCE % $/mmbtu IV. 10-Year Treasury Yield Average Monthly Yield, 1/1/00 through 6/30/07 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Source: U.S. Federal Reserve % V. 10-Year Treasury Yield During Q Daily Yield, 4/1/07 through 6/30/ /2/2007 5/2/2007 6/1/2007 7/1/2007 Source: U.S. Federal Reserve VI. Natural Gas Spot Prices 1/1/05 through 6/30/07, Henry Hub VIII. Returns by Quarter Index Q1 Q2 Q3 Q4 Q1 Q2 EEI Index (1.46) Dow Jones Industrials (0.33) 9.11 S&P Nasdaq Composite * * Price gain/loss only. Other indices show total return. Source: EEI Finance Department Category* Q1 Q2 Q3 Q4 Q1 Q2 All Companies (1.78) Regulated (2.79) Mostly Regulated (0.87) Diversified * Returns shown here are unweighted averages of consitutent company returns. The EEI Index return shown above is cap-weighted. Source: EEI Finance Department, SNL Financial and company annual reports. IX. Sector Comparison, Trailing 12 mo. Total Return For the twelve-month period ending 6/30/07 Sector Total Return (%) Telecommunications 38.2% Basic Materials 28.8% Oil & Gas 27.9% Technology 25.9% Utilities* 25.7% EEI Index 23.7% Composite 20.6% Industrials 20.4% Consumer Goods 20.0% Health Care 17.2% Consumer Services 16.9% Financials 13.9% * As defined by WSJ Market Data Group, includes electric, gas, water utilities. Source: EEI and WSJ Market Data Group /3/2005 $/mmbtu 4/3/2005 7/3/2005 Source: SNL Financial 10/3/2005 1/3/2006 4/3/2006 7/3/ /3/2006 VII. NYMEX Natural Gas Futures Aug-2007 Aug-2008 Aug-2009 Aug-2010 Source: SNL Financial August 2007 through December /3/2007 at Mar (top curve) at Jun (middle curve) at Dec (lower curve) 4/3/2007 X. Sector Comparison, Q Total Return For the three-month period ending 6/30/07 Sector Total Return (%) Oil & Gas 14.7% Industrials 10.5% Technology 10.0% Basic Materials 9.8% Telecommunications 7.6% Composite 6.2% Health Care 4.8% Consumer Goods 4.0% Consumer Services 2.7% Financials 1.6% Utilities* -0.1% EEI Index -1.5% * As defined by WSJ Market Data Group, includes electric, gas, water utilities. Source: EEI and WSJ Market Data Group

7 STOCK PERFORMANCE 3 XI. Market Capitalization at June 30, 2007 (in $Mil.) U.S. Shareholder-Owned Electric Utilities Company Stock Symbol Market Cap % of Total Exelon Corp. EXC 48, % TXU Corp. TXU 30, % Dominion Resources Inc. D 30, % Southern Co. SO 25, % Duke Energy Corp. DUK 23, % FPL Group Inc. FPL 22, % Public Service Enterprise Group PEG 22, % Entergy Corp. ETR 21, % FirstEnergy Corp. FE 20, % Edison International EIX 18, % PPL Corp. PPL 18, % American Electric Power Co. AEP 17, % PG&E Corp. PCG 15, % Constellation Energy Group Inc. CEG 15, % Sempra Energy SRE 15, % Consolidated Edison Inc. ED 11, % Progress Energy Inc. PGN 11, % Ameren Corp. AEE 10, % Allegheny Energy Inc. AYE 8, % DTE Energy Co. DTE 8, % Xcel Energy Inc. XEL 8, % KeySpan Corp. KSE 7, % Nisource Inc. NI 5, % CenterPoint Energy Inc. CNP 5, % Pepco Holdings Inc. POM 5, % Wisconsin Energy Corp. WEC 5, % MDU Resources Group In.c MDU 5, % Alliant Energy Corp. LNT 4, % SCANA Corp. SCG 4, % Northeast Utilities NU 4, % Pinnacle West Capital Corp. PNW 3, % Sierra Pacific Resources SRP 3, % Company Stock Symbol Market Cap % of Total Energy East Corp. EAS 3, % CMS Energy Corp. CMS 3, % TECO Energy Corp. TE 3, % NSTAR NST 3, % OGE Energy Corp. OGE 3, % DPL Inc. DPL 3, % Integrys Energy Group TEG 2, % Puget Energy Inc. PSD 2, % Great Plains Energy Inc. GXP 2, % Westar Energy Inc. WR 2, % PNM Resources Inc. PNM 2, % Vectren Corp VVC 2, % Hawaiian Electric Industries Inc. HE 1, % Portland General Electric Co. POR 1, % Aquila Inc. ILA 1, % Cleco Corp. CNL 1, % IDACORP Inc. IDA 1, % Black Hills Corp. BKH 1, % ALLETE Inc. ALE 1, % Unisource Energy Group UNS 1, % NorthWestern Corp. NWEC 1, % Avista Corp. AVA 1, % El Paso Electric Co. EE 1, % Otter Tail Corp. OTTR % UIL Holdings Corp. UIL % CH Energy Group Inc. CHG % Empire District Electric Co. EDE % MGE Energy Inc. MGEE % Central Vermont Public Service Corp. CV % Unitil Corp. UTL % Maine and Maritimes Corp. MAM % Total Industry $515, % Source: EEI Finance Department and Wall Street Journal Source: EEI Finance Department and Wall Street Journal XII. EEI Index Market Capitalization (at Period End) $ Billions Q4-00 Q4-01 Q4-02 Q4-03 U.S. Shareholder-Owned Electric Utilities Q4-04 Q4-05 Q4-06 EEI Index Market Cap (in $Billions) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Source: EEI Finance Department and Wall Street Journal

8 4 STOCK PERFORMANCE XIII. Comparative Category Total Annual Returns U.S. Shareholder-Owned Electric Utilities, Value of $100 invested at close on 12/31/2002 $320 $300 $280 $260 $240 $220 $200 $180 $160 $140 $120 $100 $80 12/31/2002 EEI Index Regulated Mostly Regulated Diversified 12/31/ /31/ /31/ /31/2006 6/30/2007 Full-year Full-year Full-year Full-year Full-year 6 mo EEI Index Period Return (%) EEI Index: Value of $100 invested 12/31/02 NM Regulated Group: Period Return (%) Regulated Group: Value* of $100 invested 12/31/02 NM Mostly Regulated Group: Period Return (%) Mostly Regulated Group: Value* of $100 invested 12/31/02 NM Diversified Group: Period Return (%) Diversified Group: Value* of $100 invested 12/31/02 NM * Value at period-end. / Note: Return figures represent unweighted average of constituent company returns. Source: EEI Finance Department and Wall Street Journal. stocks of companies in the Regulated group, whose dependable dividends and conservative business model make it a bond substitute for income-oriented investors, were hurt the worst by rising rates. Category results for the first half of 2007 mirror the Q2 trend. The Diversified group led with a 9.0% return, followed by the the Mostly Regulated group with a 5.8% return and the Regulated group with a 1.0% return. Rising demand for electricity in the face of declining reserve margins and the clear need for new generation capacity in many regions are reasons often cited for the relative strength seen from the Diversified group, whose competitive baseload operations appear to be beneficiaries of tightening power markets, especially those where communities oppose new baseload coal plant construction or construction of new transmission lines that can import power. XIV. EEI Index Top Ten Performers Six-month period ending 6/30/07 Company Total Return (%) Maine & Maritimes Corp. (R) 76.9 Central Vermont Public Service Corp. (R) 62.3 Public Service Enterprise Group Inc. (MR) 34.1 PPL Corp. (MR) 32.4 Constellation Energy Group Inc. (D) 27.9 TXU Corp. (D) 25.8 Edison International (MR) 24.8 Exelon Corp. (MR) 18.8 Entergy Corp. (R) 17.5 Allegheny Energy Inc. (D) 12.7 Source: EEI Finance Department Note: Return figures include capital gains and dividends. Company category shown in parentheses: R=Regulated, MR=Mostly Regulated, D=Diversified

9 STOCK PERFORMANCE 5 Steady Natural Gas Forward Curve Natural gas prices have been a driver of utility shares in recent years (the Diversified sub-group in particular), as natural gas generation is the marginal price-setter in most competitive power markets and rising natural gas prices translate into higher market electricity prices. As shown in Charts VI and VII, natural gas spot and forward prices have recovered somewhat from the lows reached late in Competitive coal and nuclear generators, with lower marginal costs than gas generators, have prospered in competitive markets with gas on the margin. Most Wall Street analysts have based their longer-term earnings estimates for competitive electricity suppliers on natural gas prices that are lower than those indicated by the forward curve. Should prices remain elevated, analysts suggest that there may be upside potential for longer-term earnings, and the behavior of the forward curve can be seen as an indicator of that potential. However, very little here is certain. The forward curve may fall if economic growth slows, cool summer weather produces below-expectation power demand and/or gas supplies rise above expectations. Moreover, political and regulatory pressures in states experiencing rising power costs due to rising fuel costs may impact the degree to which competitive generators can participate in these power markets. And rising electricity prices may translate into reduced power demand. Strong Rate Base Growth Fundamental U.S. electricity demand is growing slowly but steadily and the utility industry is in the early stages of a sizeable long-term capital investment cycle that includes rising spending on emissions control equipment, transmission and distribution upgrades and, over the longer term, a new round of baseload generation. Much of this will likely be built in rate base. EEI s recent capital spending survey shows that industrywide capital spending is set to rise from $48.4 billion in 2005 to $73.1 billion in 2007, a 51.1% increase. And Wall Street analysts forecast strong investment by the industry beyond the end of the decade. The prospect of carbon regulation adds to the potential longevity of the current build cycle, should carbon capture and sequestration become the most economically viable way of complying with future carbon limits. Nevertheless, there is a significant degree of execution risk inherent in this long-term cycle of capital investment. Utility shares suffered during the last round of baseload construction (mid-1960s to mid-1980s) when the industry was completely regulated, yet the clear need for additional capacity and the lessons learned from that period appear to support investor confidence in the potential for consistent earnings gains for the industry over the longer-term (dependent, of course, on maintenance of healthy regulatory relationships and adequate cost recovery). XV. Share Ownership by Investor Category (% of total) U.S. Shareholder-Owned Electric Utilities Institutional Retail Insider Jun- 02 Sep- 02 Dec- 02 Mar- 03 Jun- 03 Sep- 03 Dec- 03 Mar- 04 Jun- 04 Sep- 04 Dec- 04 Mar- 05 Jun- 05 Sep- 05 Dec- 05 Mar- 06 Jun- 06 Sep- 06 Dec- 06 Mar- 07 6/02 9/02 12/02 3/03 6/03 9/03 12/03 3/04 6/04 9/04 12/04 3/05 6/05 9/05 Institutional Insider Retail Total /05 3/06 6/06 9/06 12/06 3/07 Institutional Insider Retail Total Source: SNL Financial and EEI Finance Department. Note: Institutional figures represent end-of-quarter, unweighted average of the 65 publicly traded EEI Index companies. Insider data reported annually. Retail defined as 100% (Institutional % + Insider %). Totals may not add to 100 due to rounding.

10 6 STOCK PERFORMANCE M&A Potential Supports Valuations The potential for buyouts and acquisitions has lifted share prices across global equity markets this year and, while it is difficult to isolate and quantify the impact, M&A potential seems to have offered some support to utility stocks as well. On June 25, New England utility Energy East (a member of the EEI Regulated category) announced it had agreed to be acquired by European energy giant Iberdrola for $28.50 per share in cash, a 20% premium over Energy East s average closing stock price for the 30-day period ending June 22, 2007 (and 27.4% over its closing stock price on June 22). The transaction values Energy East at approximately 6,400 million euros ($8.6 billion) in terms of enterprise value (market equity value plus net debt). With the Energy East transaction, the enterprise value of IBERDROLA will surpass 83,000 million euros ($112 billion) consolidating it as one of the world s largest electricity operators. Earlier this year, the late February announcement that TXU agreed to be purchased by a private equity group led by Kohlberg Kravis Roberts, Goldman Sachs and Texas Pacific Group suggested that private equity buyers may step-up interest in making another run at whole company transactions, after regrouping from the failures of the Portland General and UniSource deals in 2003/2004. If the TXU deal closes, shareholders will receive $69.25 in cash for each share of TXU common stock, a 25% premium to the average closing share price over the 20-day period ending on Feb. 22. The buyout group s apparent primary interest in TXU s competitive operations complements two other recent private equity deals: 1) The April 25, 2006 announcement by NorthWestern Energy that it reached an agreement to be purchased by Babcock & Brown Infrastructure (BBI) in an allcash transaction valued at $2.2 billion, or $37/share, representing approximately a 15% premium to the pre-deal price, and 2) Duquesne Light Holdings July 5, 2006 announcement that it agreed to be acquired by a consortium led by Macquarie Infrastructure Partners, another Australian infrastructure investor, for $20 per share, a 22% premium over the pre-deal price. Infrastructure investors, and their deep pockets, may represent a valuable source of long-term capital for regulated companies facing capital expenditure programs that might otherwise strain their balance sheets. Mirroring Warren Buffett s approach to the industry, these funds are content with lower returns and lengthier holding periods than the more transaction-oriented private equity buyers. Should the two 2006 transactions clear regulatory hurdles, this may establish proof of concept that infrastructure funds can play a welcome role in financing regulated companies long-term capital needs. (Note: The BBI/Northwestern deal hit a roadblock on May 22, 2007 when the Montana Public Service Commission rejected the merger, and the companies are revising their offer). The fact that private equity capital is interested in both the investment potential of profitable competitive operations in tightening power markets and the slower-growing but steadier returns offered by traditional, regulated electric utilities indicates the breadth of investment opportunity across the industry s risk/reward spectrum. Rich Valuations and Risks After several years of strong share price gains and despite the mild correction in Q2, utility valuations (whether measured by PE ratios or by dividend yields and earnings yields relative to the Treasury 10-year yield) are well above historical averages. The possibility of a continued rise in interest rates remains a risk for stock prices and a potential challenge for an industry embarking on a long-term capital investment cycle. While the forward price curve for natural gas suggests continued profitability for companies with competitive coal and nuclear generation, softness in gas prices may weigh on these companies shares, particularly if the forward curve falls. Moreover, the ability of utilities to recapture rising fuel costs and other necessary expenditures is by no means a guarantee, especially in sensitive political environments. This could become a major concern given the rising spending on enhanced reliability, environmental compliance, new transmission and new generation in coming years.

11 APPENDIX-1 Companies Listed by Category (as of 12/31/05) iven the diversity of utility holding company corporate G strategies, no single company categorization approach will be useful for all EEI members and utility industry analysts. Never-theless, we believe the following classification provides an informative framework for tracking financial trends and the capital markets response to business strategies as companies depart from the traditional regulated utility model. Regulated Mostly Regulated Diversified 80%+ of total assets are regulated 50% to 80% of total assets are regulated Less than 50% of total assets are regulated Categorization of the 65 publicly traded utility holding companies is based on year-end business segmentation data presented in 10Ks. Categorization of the 5 non-publicly traded companies (shown in italics) is based on estimates derived from FERC Form 1 data and information provided by parent company IR departments. The EEI Finance and Accounting Division continues to evaluate our approach to company categorization and business segmentation. In addition, we can produce customized categorization and peer group analyses in response to member company requests. We welcome comments, suggestions and feedback from EEI member companies and the financial community. Regulated (36 of 70) Alliant Energy Corporation Ameren Corporation Central Vermont Public Service Corporation CH Energy Group, Inc. Cleco Corporation Consolidated Edison, Inc. DPL, Inc. Duquesne Light Holdings, Inc. El Paso Electric Company Empire District Electric Company Energy East Corporation Great Plains Energy Incorporated Green Mountain Power Corporation IDACORP, Inc. IPALCO Enterprises, Inc. Kentucky Utilities KeySpan Corporation Louisville Gas and Electric Maine & Maritimes Corporation Niagara Mohawk Power Corporation NorthWestern Corporation NSTAR PG&E Corporation Pinnacle West Capital Corporation Portland General Electric Company Progress Energy Puget Energy, Inc. SCANA Corporation Sierra Pacific Resources Southern Company UIL Holdings Corporation UniSource Energy Corporation Unitil Corporation Westar Energy, Inc. Wisconsin Energy Corporation Xcel Energy, Inc. Mostly Regulated (23 of 70) ALLETE, Inc. American Electric Power Company, Inc. Aquila, Inc. Avista Corporation CenterPoint Energy, Inc. CMS Energy Corporation DTE Energy Company Edison International Entergy Corporation Exelon Corporation First Energy Corp. FPL Group, Inc. MGE Energy, Inc. MidAmerican Energy Holdings NiSource Inc. Northeast Utilities Otter Tail Corporation Pepco Holdings, Inc. PNM Resources, Inc. PPL Corporation Public Service Enterprise Group, Inc. TECO Energy, Inc. Vectren Corporation Diversified (11 of 70) Allegheny Energy, Inc. Black Hills Corporation Constellation Energy Group, Inc. Duke Energy Corporation Dominion Resources, Inc. Hawaiian Electric Industries, Inc. MDU Resources Group, Inc. OGE Energy Corp. Sempra Energy TXU Corp. WPS Resources Corporation Note: Based on assets at 12/31/05

12 APPENDIX-2 Companies Listed by Category (as of 12/31/04) iven the diversity of utility holding company corporate G strategies, no single company categorization approach will be useful for all EEI members and utility industry analysts. Never-theless, we believe the following classification provides an informative framework for tracking financial trends and the capital markets response to business strategies as companies depart from the traditional regulated utility model. Regulated Mostly Regulated Diversified 80%+ of total assets are regulated 50% to 80% of total assets are regulated Less than 50% of total assets are regulated Categorization of the 65 publicly traded utility holding companies is based on year-end business segmentation data presented in 10Ks. Categorization of the 8 non-publicly-traded companies (shown in italics) is based on estimates derived from FERC Form 1 data and information provided by parent company IR departments. The EEI Finance and Accounting Division continues to evaluate our approach to company categorization and business segmentation. In addition, we can produce customized categorization and peer group analyses in response to member company requests. We welcome comments, suggestions and feedback from EEI member companies and the financial community. Regulated (37 of 73) Ameren Corporation Central Vermont Public Service Corporation Consolidated Edison, Inc. DPL, Inc. Duquesne Light Holdings, Inc. El Paso Electric Company Empire District Electric Company Energy East Corporation FirstEnergy Corp. Great Plains Energy Incorporated Green Mountain Power Corporation IDACORP, Inc. IPALCO Enterprises, Inc. Kentucky Utilities KeySpan Corporation Louisville Gas and Electric Maine & Maritimes Corporation New England Power Company Niagara Mohawk Power Corporation NorthWestern Corporation NSTAR PacifiCorp PG&E Corporation Pinnacle West Capital Corporation Portland General Electric Company Progress Energy Puget Energy, Inc. SCANA Corporation Sierra Pacific Resources Southern Company UIL Holdings Corporation UniSource Energy Corporation Unitil Corporation Vectren Corporation Westar Energy, Inc. Wisconsin Energy Corporation Xcel Energy, Inc. Mostly Regulated (26 of 73) Alliant Energy Corporation ALLETE, Inc. American Electric Power Company, Inc. Aquila, Inc. Avista Corporation CenterPoint Energy, Inc. CH Energy Group, Inc. Cinergy Corp. Cleco Corporation CMS Energy Corporation DTE Energy Company Edison International Entergy Corporation Exelon Corporation FPL Group, Inc. MGE Energy, Inc. MidAmerican Energy Holdings NiSource Inc. Northeast Utilities Otter Tail Corporation Pepco Holdings, Inc. PNM Resources, Inc. PPL Corporation Public Service Enterprise Group, Inc. TECO Energy, Inc. WPS Resources Corporation Diversified (10 of 73) Allegheny Energy, Inc. Black Hills Corporation Constellation Energy Group, Inc. Dominion Resources, Inc. Duke Energy Corporation Hawaiian Electric Industries, Inc. MDU Resources Group, Inc. OGE Energy Corp. Sempra Energy TXU Corp. Note: Based on assets at 12/31/04